Investment Property or Pay Mortgage off

S

Sweetpeaches

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Money makeover

Age: 36
Spouse's age: 45

Number and age of children: 3 kids - under 5

Income and expenditure
Annual gross income from employment or profession: 45,000
Annual gross income of spouse/partner:
100,000
Monthly take-home pay: roughly 8k p/m

Type of employment - Employee .
Employer type: I'm public servant, partner private company.

In general are you:
Savers


Summary of Assets and Liabilities
Family home value: 900,000
Mortgage on family home: 410,000
Net equity: 490,000

Cash: 350,000
Defined Contribution pension fund: approx value 700,000
Company shares : valued at 1million
Buy to Let Property value: total 800,000
Buy to let Mortgage: 170,000

Total net assets: approx 3mil.


Family home mortgage information
Lender PTSB
Interest RATE 2.95
Type of interest rate: fixed.
If fixed, what is the term remaining of the fixed rate? Fixed term up in Oct 24


Remaining term: 22 years
Monthly repayment: 2100

Other borrowings – none

Do you pay off your full credit card balance each month? Don't have one

Pension information

Value of pension fund: 700,000

Buy to let properties
Value: 800,000
Rental income per year: 70k
Rough annual expenses other than mortgage interest : 8,000
Lender: ICS
Interest rate: 7.5 variable
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:


Other information which might be relevant.
2 buy to let properties mortgage free.
1 property has a mortgage and yield isn't great. Current value at 400k, rental income 24k. Mortgage 170k. Interest 7.5%.

Life insurance: mortgage protection, income protection


What specific question do you have or what issues are of concern to you?

We know we are very fortunate.
We have €350,000 and trying to decide what to do with it. One other thing to factor in is the company shares are due to be realised in 2027 as it is being sold.

1. Buy a 3 bed semi d for approx 275-300k, rent it out, yield of 9/10%
2. Pay 300k off our mortgage on home house when fixed term is up. Even with increased interest rate repayments will fall to approx €600 pcm
3. Invest in a larger buy to let property (Pre '63/HMO or similar). Approx value €1mil. Rental income of €120,000 per annum. 12% yield
(a) personally, 300k in cash, 700k in mortgage approx rate with PTSB is 5.55%. Monthly repayment of approx €4,500 or interest only at €3,200.
(b) through a limited company (SPV). Deposit the 300k into the company and purchase through the limited company. Benefits of doing so is to set up a second pension fund and repay directors loan when financially viable.
4. Go for option 1 or 2, and when monies are realised through company sale, then do option 3(a) or (b) mortgage free.
 
In your shoes, I would be inclined to sell the mortgaged rental property and would then clear both mortgages.

You already have a lot of exposure to Irish residential property - you really don’t need any more.

I’m guessing your spouse has the €700k (DC) pension fund and that you are accruing DB pension entitlements as a public sector employee.

Is there any scope for you to make AVCs or purchase notional service?

Similarly, is there any scope for your spouse (or the company) to increase pension contributions?

I would suggest that the DC pension should be allocated 100% to global equities for the time being.

I would also suggest you consider establishing bare trusts for your kids and contributing €6k per annum (availing of the annual small gift exemption) for each kid.

Otherwise, is there any scope for you to make your home more energy efficient?

Finally, make sure you have appropriate insurances in place and write your wills/PoAs.

And enjoy the journey! Don’t be afraid to spend money on memorable holidays, etc.

Hope that helps.
 
Steven Barrett said:
Pay off your mortgage and invest in the stock market. You have enough property.
Click to expand...
Thanks Steven. Property is what we know, so it's easier said than done to just start investing in a stock market we know very little about. A 60/40 portfolio has been suggested to us but the return isn't as appealing. But maybe we do need to spend time to educate ourselves on investing in the stock market. Completely take on board that some diversification is advisable to reduce exposure.
 
Sweetpeaches said:
Thanks Steven. Property is what we know, so it's easier said than done to just start investing in a stock market we know very little about. A 60/40 portfolio has been suggested to us but the return isn't as appealing. But maybe we do need to spend time to educate ourselves on investing in the stock market. Completely take on board that some diversification is advisable to reduce exposure.
Click to expand...
You are already heavily invested in property. And we all remember the crash that happened to both the property market and the stock market in 2008. It wasn't pleasant. But property took a lot longer to recover and it is of course an illiquid asset, so it can take over a year to sell in a down market. Stocks can be sold in days.

Just because you don't know about something doesn't mean you don't invest in it. You will be investing in the biggest and best companies in the world. You can see how much big tech companies, pharma and financials make. You would be a tiny shareholder in these companies and benefit from these gains...and losses when they occur.


You are in a very good financial position at your age. Make good use of it and make sure you have planned everything out for the future.

You may not need additional life cover, but you should review your financial position if one of you died. There is a big age gap there, so it needs to be addressed. With the rental income and a significant pension, you are probably alright but it should be looked at, ensuring that all major debts are covered at a minimum.


Steven
www.bluewaterfp.ie
 
Sarenco said:
In your shoes, I would be inclined to sell the mortgaged rental property and would then clear both mortgages.

You already have a lot of exposure to Irish residential property - you really don’t need any more.

I’m guessing your spouse has the €700k (DC) pension fund and that you are accruing DB pension entitlements as a public sector employee.

Is there any scope for you to make AVCs or purchase notional service?

Similarly, is there any scope for your spouse (or the company) to increase pension contributions?

I would suggest that the DC pension should be allocated 100% to global equities for the time being.

I would also suggest you consider establishing bare trusts for your kids and contributing €6k per annum (availing of the annual small gift exemption) for each kid.

Otherwise, is there any scope for you to make your home more energy efficient?

Finally, make sure you have appropriate insurances in place and write your wills/PoAs.

And enjoy the journey! Don’t be afraid to spend money on memorable holidays, etc.

Hope that helps.
Click to expand...
Thanks a million for all the above.

Will look into purchasing notional service.

Would you suggest a particular vehicle to go with for the bare trust?

We're sitting at a B2 rating on the house. Unless we blocked up two chimneys, and installed a ground to heat mechanism, I don't think we'd get much higher. But something to consider!
 
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